“Failed” late payment laws to be replaced by passive-aggressive finger-pointing

Late payment is a perennial topic of interest for freelancers. We’ve all experienced it, and all evidence points to it becoming worse than ever, especially where payments from big corporates are concerned. Now Minister for Business and Enterprise Mark Prisk has said that legislation designed to put a stop to late payment (in the form of late payment interest) introduced by the Labour Government “hasn’t worked”, and that the legal right to claim late payment interest is underutilised by freelancers and contractors for fear of being blacklisted and denied future contracts:

“It comes down to the relationship between a small supplier and a larger customer – are you really going to use legislation in those circumstances? It’s unlikely. We’re trying to take a more practical approach and improve relationships.”

He encouraged businesses to sign up to the Prompt Payment Code, a voluntary scheme where companies pledge to pay suppliers within the terms of their contract. Mr Prisk called on all suppliers to name and shame those companies who fail to pay up on time. He was speaking at an event organised by the Forum of Private Business, which has been a vocal supporter of stemming late payment to small businesses, and has kept a late payment “Hall of Shame” on its website for the last few years.

What do you think is the correct approach? Is the legal right to late payment interest beneficial to freelancers and contractors – and have you ever used it? Can a “Hall of Shame” work as an effective deterrant?

Two wrongs do not make a right. Responding to unprofessional behavior (a client not paying on time) with an equally unprofessional reaction (publicly naming and shaming) is a short-term adrenalin rush with regrettable long-term consequences.

Nor is the solution to sign up to the “Prompt Payment Code”, which by all appearances is a publicity stunt for its principals. Let’s stand back for a minute and think about the absurdity of making a pledge to pay invoices on time. What’s next, signing up to a pledge to wash your hands when you use the loo?

The solution to an excessively late payment, whether it is from a one man band or a big corporation, is the court system. Make your threat and carry out on it. After you put the paperwork in the post, the trouble is the nonpaying client’s to sort out, not yours. And it works.

http://twitter.com/My_sexist_boss Julie Anonymous

will wait to see some actual results before popping the champagne.

Jaffa Brown

Completely agree with Heather. No pledges, sign-ups or naming and shaming will work. The only way to get the big companies to take notice and pay their bills on time is to either make the item cost more (through late payment charges and interest charges) or via court action.

The main item says that late payment interest is not being used – well that depends on where the relationship is going in the future. If a customer is not willing to pay their bills, then as a small business, do you want to work with them again in the future? If not, then why not charge them interest for the money that has been lost or delayed?

With the economic climate as it is, late paying customers are only going to increase in number – and on the whole, its the bigger companies who pay later. Asking them to pledge or naming and shaming is a waste of time – any such publicity will be lost in the noise that they create themselves.

Bobby_Bob

I’d be interested to see some legislation discussed around maximum payment periods – I’ve had people demand 90-day terms for very small invoices before. Quite apart from whatever issues your business has if they need 90 days to settle a <£300 invoice, it's a huge inconvenience.

timothytim

Early shout for blog title of the year?

http://twitter.com/jamieshiers Jamie

As Jon points out, it is the lack of confidence from business owners who seem unwilling to use this law. Aslong as freelancers remember to have contracts drawn up for each client with clauses relating to payment and late payments. If a client won’t pay then a combination of this legislation and the courts does work.
If you havent seen Mike Monteiro’s F*ck you pay me talk, http://vimeo.com/22053820, it is well worth the watch.

http://www.facebook.com/jon.norris3 Jon Norris

Agreed Jamie, “Fuck you, pay me” is a great watch for any freelancer!

Mary

I have a completely different approach to payment for the work I do: I get up to 50% deposit up front, (% depending on the size of the job) with the balance paid on completion of the job. THEN the client gets the files. This works well for me as an independent designer, but I appreciate it wouldn’t work in all employer/freelancer situations.

Jaffa Brown

Having the money up front or before delivery of the supply is all well and good when the customer/project allows for it, but there is a MAJOR upside for late paying customers. If you do decide to charge them interest, the amount you can charge is way beyond any interest you could possibly get having it sat in a bank. In the times when I have late payers, getting 6+% interest is great news for me (plus my T&C £50 late payment admin charge per interest invoice)…. as long as the customer does pay up in the end.

http://twitter.com/My_sexist_boss Julie Anonymous

im not sure thats a good way of looking at things. if you secretly hope for late payment, someday it’ll probably come back to bite you in the bum.

http://twitter.com/Craig_McKenna Craig McKenna

Heather has a very good point, as always very well made.
Personally the best way to ensure payment is to ensure that the client can’t live without what you have done for them. If you built a website, take it down. If you are delivering an ongoing service, stop delivery. If they still don’t pay and therefore haven’t valued what you have done then the courts are the only option.
I had a business once which had far too many issues getting paid, once we had ceased trading it dawned on me that although we were good, we werent as good as we believed and the clients prioritised other suppliers above us as they valued their services higher than ours.
It can be hard to accept but it is true.